Digital Insurance: Business Innovation in the Post-Crisis Era

January 3, 2017

The following is an excerpt of an interview between Kevin Hanrahan (KH), CEO of TranSigma, and Bernardo Nicoletti (BN), EMEA Director of TranSigma, about Bernardo’s book ‘Digital Insurance: Business Innovation in the Post-Crisis Era’.

KH: Why did you decide to write ‘Digital Insurance: Business Innovation in the Post-Crisis Era’?

BN: I have been working for a long time in the financial services industry. I started as an executive and later as a consultant. Initially I worked in banking. When I started to work for an insurance company, the low level of digitization and plenty of manual work struck me. The higher margins in the insurance industry justified such an inefficient organization. With the 2008 economic and financial crisis, the world changed. Four challenges were more and more impacting on the industry. The book describes them as the 4 C’s, due to their initials. They are the ever-changing Customers, with the younger generation (the “Millennials”) digitally natives becoming more important, the Competition, more and more aggressive and increasingly global, the Compliance with an increase of regulations in defence of the customers (such as Solvency 2) impacting on the reporting to the regulators, and finally a great push on Cost reductions. The only way out for the insurance companies is to embrace the digital transformation. This is the profound and accelerating transformation of business activities, processes, competencies, and business models to leverage fully the changes and opportunities of the digital solutions. It and their impacts companies in a strategic and tactical way. The content of the book, concisely, is to embrace and exploit digital transformation to sustain the growth of the insurance companies (and in some cases their survival).

KH: How important is a digital transformation in insurance?

BN: The question on digital transformation is not “if” but “when”. The answer is very simply “Now”. In order to face the challenges of the socio-economic environment, it is essential to change and be more effective, efficient, economical, and indeed ethical (the 4 E’s). The only way is to adopt the digital transformation, to support the innovation in terms of products/services, processes, platforms, and people (the 4 P’s). The book goes into details on these aspects. It describes new products (such as pay-per-use policies), new processes (like selling through the mobile), new platforms (how to digitize, both in terms of traditional automation and in terms of advanced solutions), and how to train, motivate, and empower people at the different levels of the organizations. These are big challenges. The book provides methodologies to support the digital transformation. It is full of real case examples of organizations that have been successful in transforming these challenges into opportunities. The business cases in the books clearly demonstrate that insurance companies leading in digital insurance have been able to reach margins substantially higher than the laggards.

KH: How can insurers reduce costs while improving the quality of service?

BN: The book goes into details on how to cope with the challenge: “Do more with less”. The book describes the types of new products/services to be offered in a digital age. It also underlines how to change the processes to cope with the new challenges. It describes the new ways of organizing the companies and finally underlines the new business models. The latter are actually the way to start. It is essential to design and decide on them. A business model is a plan for selecting the target customer base, adding value to them, defining the channels and the best customer experience, designing processes and selecting resources and partners/vendors, identifying sources of revenue and the best pricing, and details of financing. The book details how to use the new solutions, such as the Internet of Everything, the social networks, cloud computing, and the mobile. Particular attention is paid to describe Big Data Analytics. This is the way to monetize the increasing number of data available to the companies, thanks to the new technologies. It is possible to exploit them to better describe, predict, and prescribe the best decisions. The book presents in details the method to use, based on leaning processes and digitizing them.

KH: What do you believe will be key to the future of the industry?

BN: Digital Insurance: Business Innovation in the Post-Crisis Era has a specific chapter on the future of the Insurance industry.

Similar to what is happening to the manufacturing world with the initiative Industry 4.0, there will be an Insurance 4.0. This will be characterized by a higher level of digitization but also from a higher level of automation and interconnection.

In the case of automation, Robot Process Automation (RPA) will be used more and more.  RPA is the application of technology that allows employees in a company to configure computer software or a robot to capture and interpret existing applications for processing a transaction, manipulating data, triggering responses, and communicating with other digital systems. At the same time, RPA uses physical robots to perform the physical operations. RPA is similar to a person. They have a “hand”, a robot which can perform some physical operations, be them to answer a phone or open an envelope, and a Brain” a software application which could OCR the content of a document and take an action such as answering with an email of even printing a letter, put it in an envelope and send it.

The push on interconnection will provide a big support to a complete redesign of the processes necessary to take into account digitization and automation and provide a real Straight Through Processing (STP) end-to-end.

Finally, insurance will start offering services additional to the basic policies they issue today. For instance, in the case of Property and Casualty (P&C) insurance, they might start offering services of monitoring, repairing, and servicing of the insured assets.

KH: Bernardo, I know you rigorously apply the scientific method of your compatriot Galileo Galilei. You consult, later you theorize on your work, publish a book and then you start again. What is your current consultancy work and what will be your next book?

BN: This is an interesting question. I am now working on the next revolution: Insurtech. I spoke about revolution and not evolution like in the case of digital transformation. The next revolution in insurance is Insurtech. Insurtech refers to the use of technology innovations designed to use savings and efficiency from an innovated insurance industry business model. Insurtech is a portmanteau of “insurance” and “technology” that was inspired by the term Fintech. The belief driving Insurtech companies is that the insurance industry is ripe for innovation and disruption. Insurtech is exploring avenues that large insurance firms have less incentive to exploit, such as offering ultra-customized policies, social insurance, and using new streams of data from internet-enabled devices to dynamically price premiums according to observed behavior, at the same time offering new services make possible thanks to technology. Insurtech is a disrupting innovation. It can generate significant market changes, modifying dominant logic, and affecting the strategic positioning of companies. Concisely, it is about increasing customer experience, improving market performance, reducing inefficiency and—equally important—providing open access to the online and mobile markets. This is the subject of the next book, due to be published in the second quarter of 2017. By the way, one important recommendation in the book is: beware of Chinese Insurtech.

KH: Which is the color of the cover of your next book?

BN: Good question. The color for Digital Insurance: Business Innovation in the Post-Crisis Era is green, like the color of the bucks it will bring. The color of the book on Insurtech will be red, like the color of a revolution.  Stay tuned!!


About Bernardo Nicoletti

Bernardo Nicoletti is TranSigma’s EMEA Director. Bernardo provides consulting and management coaching internationally.  Projects emphasize Lean and Digitizing processes, primarily to financial institutions. With TranSigma, he’s consulted with GE Capital, AIG, Galileo, Guthy-Renker, Saudi Holland Bank, and Santander.

A frequent speaker at international events, Bernardo has authored more than 20 business books, published in Italy, UK, and China. His most recent book, “Digital Insurance: Business Innovation in the Post-Crisis Era”, covers Mobile Banking and Digital Insurance (Nov, 2015, with Palgrave-MacMillan).

He also teaches Advanced Procurement Management at the University of Rome, Tor Vergata, Rome, Italy.